Fiscal 2012 Q4

Investor Presentation

(NYSE: SPA)

September 5, 2012

Exhibit 99.1

2

Safe Harbor Statement

Safe Harbor Statement

Certain

statements

herein

constitute

forward-looking

statements

within

the

meaning

of

the

Securities

Act

of

1933,

as

amended

and

the

Securities

Exchange

Act

of

1934,

as

amended.

When

used

herein,

words

such

as

“believe,”

“expect,”

“anticipate,”

“project,”

“plan,”

“estimate,”

“will”

or

“intend”

and

similar

words

or

expressions

as

they

relate

to

the

Company

or

its

management

constitute

forward-looking

statements.

These

forward-looking

statements

reflect

our

current

views

with

respect

to

future

events

and

are

based

on

currently

available

financial,

economic

and

competitive

data

and

our

current

business

plans.

The

Company

is

under

no

obligation

to,

and

expressly

disclaims

any

obligation

to,

update

or

alter

its

forward-looking

statements

whether

as

a

result

of

such

changes,

new

information,

subsequent

events

or

otherwise.

Actual

results

could

vary

materially

depending

on

risks

and

uncertainties

that

may

affect

our

operations,

markets,

prices

and

other

factors.

Important

factors

that

could

cause

actual

results

to

differ

materially

from

those

forward-looking

statements

include

those

contained

under

the

heading

of

risk

factors

and

in

the

management’s

discussion

and

analysis

contained

from

time-to-time

in

the

Company’s

filings

with

the

Securities

and

Exchange

Commission.

Adjusted

operating

income,

adjusted

net

income

and

adjusted

income

per

share

–

basic

and

diluted

and

adjusted

earnings

before

interest,

taxes,

depreciation

and

amortization

(”adjusted

EBIDTA”) 

are

non-GAAP

financial

measures

that

exclude

or

add

the

effect

of

certain

gains

and

charges,

including,

for

fiscal

2011,

imputing

taxes

at

a

36%

effective

rate.

Sparton

believes

that

the

presentation

of

non-GAAP

financial

information

provides

useful

supplemental

information

to

management

and

investors

regarding

financial

and

business

trends

relating

to

the

Company’s

financial

results.

More

detailed

information,

including

period

over

period

segment

comparisons,

non-

GAAP

reconciliation

tables

and

the

reasons

management

believes

non-GAAP

measures

provide

useful

information

to

investors,

is

included

in

the

Fiscal

2012

Fourth

Quarter

and

Full

Year

Financial

Results

press

release.

2

3

Investment Considerations

Investment Considerations

Operational Phase

of Turnaround

Completed

Established

Growing

Business

Expanded

Gross Margins

Solid

Balance Sheet

Repositioned the

Company for Growth

112 year old business with market leadership in defense and

medical sectors; 10% sales increase in fiscal 2012; 35% year-

over-year adjusted EBITDA increase in fiscal 2012

New management; significant cost removed from fiscals 2009-10;

Adjusted fiscal 2012 EPS (diluted) was $0.91, fiscal 2011 EPS

was $0.64 and fiscal 2010 EPS of $0.40

As of June 30, 2012, $47 million in cash and no bank debt (post-

acquisitions); $20 million unused line of credit; Completed $3.0

million stock buyback program in FY2012

FY2011

26 new programs and 11 new customers

Developed 2 new proprietary products (GEDC-6/PHOD-1)

FY2012

40 new programs and 20 new customers

Developed 1 new proprietary product (AHRS-8)

Fiscal 2012:

17.2%

Fiscal 2011:

16.3%

Fiscal 2010:

15.3%

Fiscal 2009:

7.2%

4

Mission

Mission

Sparton will continue to  differentiate itself as a premier

supplier of sophisticated electromechanical devices,

sub-assemblies and related services for highly

regulated environments in the Medical, Military & 

Aerospace, and Industrial markets by leveraging and

expanding its capabilities and offerings within the

electromechanical value stream.

5

Our Business

Our Business

•

Sparton

is

in

one

single

line

of

business

called

Electromechanical

Devices.

•

Sparton

is

currently

segmented

into

three

financial

reporting

business

units.

Defense & Security:

Design and Manufacturing (both as a contractor and OEM)

Medical Device:

Contract Design, Manufacturing, and Assembly

Complex Systems:

Commonly referred to within legacy Sparton as EMS, but

currently consists of circuit card assembly and box build

(contract manufacturing and assembly) outside of the medical

and defense markets. In the future, may include electro-

mechanical based B2B products as well as EMS services.

•

Sparton currently serves three electronics markets

–

Medical, Military &

Aerospace, and Industrial & Instrumentation.

6

Strategically Located

Strategically Located

•

Four domestic and one low cost country

manufacturing facilities

–

De Leon Springs, FL

(Orlando)

–

Strongsville, OH

(Cleveland)

–

Frederick, CO

(Denver)

–

Brooksville, FL

(Tampa)

–

Ho Chi Minh City, Vietnam

–

Sparton owns 448,000 square feet of

production facility capacity across the U.S.

and Asia

•

950 employees worldwide

7

•

Lack of strategic direction

•

Poor financial condition

•

Bad delivery & quality

performance

•

Limited business development

personnel

•

No marketing programs

•

FY12 revenues of $224 million

•

Continue to grow medical

segment

•

July 2012 amendment and    

extension of credit facility

•

Awarded 40 new business

programs

-

20 of which were new

customers

•

Completed $3 million in share

buyback

•

Continue to

gain new

business

programs

•

Invest in

developing

proprietary

products

•

Focus on

targeted

acquisitions

Turnaround Summary

Turnaround Summary

Operating Challenges

•

Fragmented operating system

•

Overcapacity

•

Manufacturing inefficiencies

-

Unsupported lean

programs

-

Inventory control &

disposition

•

Customer contractual issues

•

Liquidity concerns

Organic Growth Challenges

(a)

Includes

restructuring

and

impairment

charges

of

$0.71

per

share

and

a

non-cash

provision

for

income

taxes

of

$0.18

per

share

(b)

Adjusted operating income, adjusted net income and adjusted income per share (diluted) are non-GAAP financial measures that exclude or add the effect of certain gains and

charges, including imputing taxes at a 36% effective rate.

Year End 2012 Status

FY2013

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

EPS

Finance & Operations

Organic Growth

Turnaround Period

Plan

FY2013

Implement

FY2009

FY2010

FY2011

FY2012

Implement

0.64

b

(1.61)

a

0.40

b

Sustain / Continuous Improvement

Grow

Plan

FY2007

FY2008

(0.79)

(1.34)

0.91

b

8

Senior Management Team

Senior Management Team

Cary B. Wood, Chief Executive Officer

•

Appointed CEO November 2008

•

Formerly Chief Operating Officer of Citation Corporation, a private company with foundry,

machinery and assembly operations with 20+ years of experience at GM, United Technologies &

Elkay Manufacturing

•

Developed a track record with performance turn-around and growth strategies in both private and

public company settings

•

Appointed CFO in April 2009

•

Formerly Director of Treasury and International Finance at U.S. Robotics Corporation with 15+

years of experience at Grant Thornton LLP

Gordon

Madlock,

Senior

Vice

President

–

Operations

•

30+ years experience improving manufacturing quality and productivity at companies including

Citation Corporation, Lear Corp. and United Technologies

Mike

Osborne,

Senior

Vice

President

–

Corporate

Development

•

Responsible for driving corporate and business unit strategic planning and development, M&A

activity, business development & customer retention, and investor relations

Steve

Korwin,

Senior

Vice

President

–

Quality

&

Engineering

•

Extensive experience leading manufacturing operations and improving quality processes to

increase profitability and sales

Larry

Brand,

Vice

President

–

Corporate

HR

•

Considerable experience providing strategic leadership and tactical direction for the overall

Human Resources function to senior management and company leadership teams

Gregory Slome, Chief Financial Officer

9

Smaller Board

Board

size

reduced

from

11

to

7

(6

independent,

1

non-independent)

Destaggered

All directors require a majority vote threshold in order to be

Board

elected at each annual meeting

Say-on-Pay

Implemented “say-on-pay”

vote on executive compensation

Aligned Incentive

Established Short Term Incentive Plan based on annual

Plan

performance objectives and Long Term Incentive Plan based on

long term financial metrics in alignment with shareholder interests

Updated Governing

Updated the Articles of Incorporation, Code of Regulations, and

Documents

Committee Charters to reflect today’s business environment

Improved Corporate Governance

Improved Corporate Governance

10

Market Dynamics

Market Dynamics

Medical

Military &

Aerospace

Computer

Automotive

Consumer

Electronics Market ($1.3 trillion)

Total 2010 EMS/ODM Outsourced Market:

$276 billion

2010 –

2013 Compounded Annual Growth Rate:

7.6%

Defense & Security

Navigation & Exploration

Medical

= business segment market focus

Highest growth

sector

No current

customers

Volume &

commodity pricing

resulting in low

margins

OEMs are experts

at outsourcing

High growth

High volume

production drives

lower margins

Outsourcing

mostly in low cost

country regions

Complexity is

general low

Moderate growth

High volume

production drives

lower margins

Outsourcing

mostly in low cost

country regions

OEMs are experts

at outsourcing

Moderate growth

High volume

production drives

lower margins

Outsourcing

mostly in low cost

country regions

OEMs are experts

at outsourcing

Source:

Technology Forecasters Inc, Dec. 2010

Market:

$15B

Growth:

9.3%

Market:

$6B

Growth:

6.2%

Market:

$20B

Growth:

6.6%

Market:

$10B

Growth:

12.9%

Market:

$44B

Growth:

7.8%

Market:

$84B

Growth:

6.8%

Market:

$98B

Growth:

3.1%

Complex Systems

Industrial

&

Instrumentation

Moderate growth

Blue chip

customers

Preferred supplier

status

New to

outsourcing

Contract design,

mfg, and assembly

roll-up opportunity

Regulated market

(ITAR, COMSEC)

Moderate growth

Blue chip

customers

Preferred supplier

status

Contract design,

mfg, and assembly

roll-up opportunity

Regulated market

(FDA)

High growth

Blue chip

customers

New to

outsourcing

Contract design,

mfg, and assembly

roll-up opportunity

Communication

11

Vision

Vision

Sparton will become a $500 million enterprise by fiscal

2015 by attaining key market positions in our primary

lines of business and through complementary and

compatible acquisitions; and will consistently rank in the

top half of our peer group in return on shareholder

equity and return on net assets.

12

Shifting Revenue Mix To

Shifting Revenue Mix To

Higher Margin Businesses

Higher Margin Businesses

DSS

Medical

Complex Systems

7% -

10%

FY2012 by Segment

(Revenue of $224 million)

FY2011 by Segment

(Revenue of $203 million)

Backlog

FY2013 Target Gross Margin by Segment

FY2012 by Market

(Revenue of $224 million)

13% -

16%

20% -

25%

111.3

94.7

99.6

112.8

113.7

119.3

122.4

137.3

145.5

126.5

146.6

148.4

0

20

40

60

80

100

120

140

160

FY10Q1

FY10Q2

FY10Q3

FY10Q4

FY11Q1

FY11Q2

FY11Q3

FY11Q4

FY12Q1

FY12Q2

FY12Q3

FY12Q4

13

•

Develop, design, and manufacture security

products, primarily anti-submarine warfare

detection devices for the U.S. and other free-

world governments, and commercially

develops spin-off technology for existing and

alternate markets (Navigation & Exploration)

•

One of the two largest sonobuoy producers

–

Consumable device lasting approximately 8

hours used to detect submerged submarines

•

FY2012 Sales: $74 million, consistently

profitable business

•

Visible Business: $77 million in government

funded backlog as of June 30, 2012

•

Key Customers:

Defense & Security Systems

Defense & Security Systems

Sonobuoys

Navigation Sensors

Defense & Security Systems

Defense & Security Systems

Market Outlook

Market Outlook

•

Government FY2009 production peak was realized

primarily in Sparton’s FY2011

–

Reduced U.S. Navy sonobuoy production volume in Sparton’s

FY2012 will be partially offset by the pursuit of new

developmental engineering funds from the DoD for

Antisubmarine Warfare related applications ($37 million over 5

years of engineering funds already announced)

•

High Altitude Antisubmarine Warfare (HAASW)

•

Deep Water Active Distributed System (DWADS)

•

Comms at Speed & Depth (CSD) {on-hold}

•

Q125 Technology Improvements

•

Q-36 ECP Program

–

Continued military actions taken by North Korea and China

should have an impact in the use of sonobuoys in that region

–

The leak of government sensitive information may also put

foreign nations on guard and require more monitoring of their

territorial waterways

–

U.S. Navy plans to buy 117 P-8A anti-submarine warfare, anti-

surface warfare, intelligence, surveillance and reconnaissance

aircraft to replace its existing P-3 fleet. Initial operational

capability is scheduled for 2013.

–

The Indian navy signed a contract for eight P-8I aircraft in

January 2009. Boeing will deliver the first P-8I within 48 months

of contract signing and the remaining seven by 2015.

•

Foreign sales are still somewhat unpredictable although a sharp

increase

was

seen

in

the

2

nd

quarter

of

FY2010

&

1

st

nine

months of FY2012

The Boeing P-8 Posiden aircraft to become the new

launch vehicle for sonobuoys

•

14

15

Medical

Medical

•

Design and manufacture medical devices and instruments for the In Vitro

Diagnostics and Therapeutics Device markets

–

Work with OEMs and biomedical companies to interface their core technology into

a complex medical laboratory instrument or point of care device

–

Manufacturer

of

The

NeuroStar®

TMS

Therapy

System,

the

first

and

only

Transcranial Magnetic Stimulation (TMS) device cleared by the FDA for the

treatment of depression

•

FY2012 Sales: $111 million of consistently profitable business

•

Visible Business: $46 million of backlog as of June 30, 2012

•

Recurring revenue due to highly regulated medical industry

•

Key customers:

Analyzers

Neurology

Blood Separation

16

Complex Systems

Complex Systems

•

Manufacturer of circuit card assemblies and electronic based box

build products primarily for the military and commercial aerospace markets 

•

New prototyping capabilities to shorten development and introduction lead

times for customers

•

FY2012 External Sales: $39 million

•

Visible Business: $25 million of backlog as of June 30, 2012

•

Consolidated business from old and inefficient sites to state-of-the-art and

technologically advanced facilities in Florida and Vietnam for improved

efficiencies and capacity utilization

•

Key Customers:

Circuit Board

Assembly

Sub Assembly

Complete System

Box Build

17

Strategic Direction

Strategic Direction

Growth Planning by Segment

Growth Planning by Segment

Navigation & Exploration

Pursue complementary and

compatible acquisitions

including B2B products and

other services.

Medical

Defense & Security

Complex Systems

Pursue complementary and

compatible acquisitions

including B2B products and

other services that do not

directly compete with our

customers.

Develop new Navigation System and

Acoustic Detection & Communication

products

for existing and new markets

such

as Defense, Port Security, Oil & Gas, and

Advanced Security Systems.

Continue to lead in Anti-Submarine Warfare 

(ASW) device production and related

advanced developmental engineering

projects for the U.S. government.

Continue to make business enhancements to

improve its return on sales by engaging new

and existing customers on contract design

and manufacturing.

Improve market share within the In Vitro

Diagnostics  and Therapeutic Device markets

through geographic expansion and new &

increased vertical offerings.

Executive

Leadership

Team

Charter:

Manage

the

business

to

increase

shareholder

value

by

achieving

profitable

organic

growth,

completing

complementary

and

compatible

acquisitions,

and

fixing

or

divesting

underperforming

lines

of

business.

18

Growth Investments

Growth Investments

Fiscal 2012 Summary

Fiscal 2012 Summary

Focus:

Use

growth

investments

to

achieve

sustainable

year-over-year

revenue

and

profit

increases

and to

further

place

protective

barriers

around

Sparton.

Supported by market research &       

go-to-market programs

FY11

FY12

FY11

FY12

FY11

FY12

Q1

5

9

3

3

2.2

$  

6.0

$  

Q2

6

7

2

5

4.4

5.0

Q3

12

12

5

7

9.1

7.6

Q4

3

12

1

5

2.0

5.2

Total

26

40

11

20

17.7

$

23.8

$

Gyro-enhanced digital compass

Hydrophone

($ in millions)

GEDC-6

PHOD-1

AHRS-8

Internal Research & Development

Fiscal 2011

Fiscal 2012

Temperature compensated attitude

heading reference system

New Business Awards

Programs

New

Customers

Potential  Annual

Revenue

Acquisitions

Fiscal 2011

Fiscal 2012

Delphi Medical

Byers Peak

none

Strategic

M&A

Internal

Research &

Development

(IP)

Targeted

Business

Development

19

Financial Highlights

Financial Highlights

20

•

Adjusted

net

income

of

$4.0

million,

or

$0.40

per

share,

versus

adjusted

net

income

of

$2.9

million,

or

$0.28

per

share

in

the

prior

year

quarter

•

Adjusted operating margin of 9.9% compared to 7.3% last year

•

Awarded 12 new business programs with 5 new customers

•

Quarter end sales backlog of approximately $148.4 million, up 8%

•

Adjusted

EBITDA

of

$6.8

million

versus

$5.1

million

in

the

prior

year

quarter,

an

increase

of

32%.

•

Subsequent Event: July 2012 amendment and extension of the

Company’s revolving credit facility

4

th

Quarter Highlights

21

Sustained Profitability

Sustained Profitability

(Adjusted)

2012

2011

2012

2011

Net Sales

$ 223,577

$ 203,352

$ 223,577

$ 203,352

$  20,225

Gross Profit

38,502

33,168

38,396

33,168

5,228

17.2%

16.3%

17.2%

16.3%

Selling and Administrative Expense

22,232

20,842

22,232

20,842

(1,390)

9.9%

10.2%

9.9%

10.2%

Internal R&D Expense

1,293

1,110

1,293

1,110

(183)

Amortization of intangible assets

435

545

435

545

110

Restructuring/impairment charges

(68)

75

-

-

Gain on acquisition

-

(2,550)

-

-

Gain on sale of property

-

(139)

-

-

Impairment of intangible asset

-

3,663

-

-

Impairment of goodwill

-

13,153

-

-

Other operating expense, net

65

298

65

298

233

Operating Income (Loss)

14,545

(3,829)

14,371

10,373

3,998

6.5%

-1.9%

6.4%

5.1%

Income Before Provision For (Benefit From) Income Tax

14,586

(3,943)

14,285

10,259

4,026

Provision For (Benefit From) Income Taxes

5,078

(11,404)

4,973

3,693

(1,280)

Net Income

$      9,508

$      7,461

$      9,312

$      6,566

$    2,746

4.3%

3.7%

4.2%

3.2%

Income per Share (Diluted)

$        0.93

$        0.73

$        0.91

$        0.64

$      0.27

($ in 000’s, except per share)

(adjusted removes certain gains and charges, including, for fiscal 2011 imputing taxes at 36% effective rate)

YoY

Variance

(Reported)

(Adjusted)

Fiscal

Fiscal

22

Quarterly Adjusted EPS

Quarterly Adjusted EPS

Diluted

Diluted

$0.64

$0.91

$-

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

Q1

Q2

Q3

Q4

YTD

FY11 YTD

FY12 YTD

FY11

FY12

23

Liquidity & Capital Resources

Liquidity & Capital Resources

($ in '000)

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Cash and equivalents

24,550

26,984

30,610

26,682

46,950

LOC Availability

17,541

17,533

17,290

16,469

16,277

Total

42,091

44,517

47,900

43,151

63,227

($ in '000)

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Credit Revolver

-

-

-

-

-

IRB (Ohio)

1,796

1,766

1,735

1,702

1,669

Total

1,796

1,766

1,735

1,702

1,669

($ in '000)

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Net Inventory

38,752

41,816

38,545

39,252

35,102

Cash Availability

Debt

Inventory

25,588

22,959

1,917

1,796

1,669

0.36

0.42

0.03

0.02

0.02

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0

25,000

50,000

Jun-08

Jun-09

Jun-10

Jun-11

Jun-12

24

•

Implementation of the strategic growth plan

–

Continue

to

gain

traction

on

a

nationally

focused

direct

selling

effort

–

Further leverage Viet Nam as a low cost country alternative and in-region provider

–

Maintain our level of investment in internal research & development to commercially extend our

product lines

–

Continue to enable our engineering workforce to develop new and innovative proprietary solutions

for our end markets

–

Continue to seek out complementary and compatible acquisitions

•

Focus on sustained profitability

–

Continue margin improvements in Complex Systems

–

Increase capacity utilization

–

Improve the working capital turnover rate

–

Continue additional improvements in operating performance through lean and quality efforts

•

Year-over-year increases in revenue and profitability with the second half

of fiscal

2013 being stronger than the first half as experienced in the previous two fiscal

years

Fiscal 2013 Outlook

Fiscal 2013 Outlook

25

Sparton Corporation

NYSE: SPA

Cary Wood, President & CEO

425 N. Martingale Road

Suite 2050

Schaumburg, IL 60173